Blackboard leads newcomers; Iconix gains as stock rallies; Aspect higher, Thornburg flat on light trading

By Kenneth Lim

Boston, June 15 - Blackboard Inc. led the new deals on Friday as convertibles making their secondary market debut had a generally positive session.

Blackboard gained a couple of points after its deal priced within talk as investors said the offering had one of the better terms compared to recent deals that may have been too aggressively marketed.

Iconix Brand Group Inc. also climbed on the strength of its common stock despite ambivalence regarding the attractiveness of its deal.

Aspect Medical Systems Inc. was mostly quiet but gained slightly in light trading when the market opened.

Thornburg Mortgage Inc. was mostly flat after its deal was upsized, although investors expect the tightly placed deal to be quiet in the days ahead.

Few convertibles saw significant action outside of the new deals.

"It was very, very quiet today," a sellside convertible trader said. "Extremely quiet...The summer's in full swing. A lot of guys left early today, I could tell from my Bloomberg."

Blackboard leads newcomers

Blackboard's new 3.25% convertible senior note due 2027 gained right out of the gates on Friday as investors took warmly to its deal.

"Blackboard was the best of the three deals that came last night, traded through 102," a sellsider said.

Blackboard priced its $150 million offering with an initial conversion premium of 62% on Thursday after the market closed. The convertible, which was offered at par, was 101.5 bid, 102 offered against a stock price of $40.03. Blackboard stock (Nasdaq: BBBB) closed at $40.47, up by 1.1% or 44 cents.

The deal was talked at a coupon of 3% to 3.25% and an initial conversion premium of 60% to 65%.

There is an over-allotment option for a further $15 million.

Credit Suisse was the bookrunner of the registered offering.

If Blackboard's common stock trades above the conversion price, which is initially $64.85 per share, the conversion rate will be increased by up to an additional 9.5605 shares per note. That increment is an additional 0.62 times the base conversion rate.

Blackboard, a Washington-based provider of enterprise learning software applications, said $19.4 million of the proceeds will be used to repay an outstanding senior secured term loan with the remainder earmarked for general purposes.

"I think compared to some of the other deals we've seen the past few days this was one of the better looking ones," a buyside convertible trader said.

"This was a pretty interesting deal," the buysider said. "Basically it was cheap and it gave you pretty nice upside. The premium looks high at first glance, but because they've got the embedded warrants what you'll see is they could potentially let you enjoy more of the stock upside than a more conventional structure."

Iconix gains, comes near cheaps

Iconix's new 1.875% convertible senior subordinated note due 2012 also rose on Friday as its stock surged over the session, but the deal drew mixed reviews from the Street.

The new convertible, which was offered at par, traded at 103 against a stock price of $22.30 on Friday. Iconix stock (Nasdaq: ICON) closed at $22.55, up by 6.37% or $1.35.

"Iconix also traded well," a sellside convertible strategist said. "The stock was up pretty good too, probably in line dollar neutral to where it closed, although I don't think it models cheap. I still don't think it's cheap."

Iconix priced the $250 million offering with an initial conversion premium of 30% on Thursday after the market closed. The deal was talked at a coupon of 1.5% to 2% and an initial conversion premium of 30% to 35%.

There is an over-allotment option for a further $37.5 million.

Merrill Lynch and Lehman Brothers were the bookrunners of the Rule 144A offering.

Iconix, a New York-based brand management company, said the proceeds of the deal will be used to fund convertible note hedge and warrant transactions and to invest in or acquire new brands.

The convertibles also have an accounting change provision, where the company can call the notes at 102% of par or holders can convert and receive the conversion rate plus a make-whole premium and 2% of par.

The strategist said the accounting change provision helped the deal stand out.

"It does have an interesting accounting change provision where they can call it if there's certain accounting changes," the strategist said. "I thought that was an interesting thing to have."

Aspect gains on thin volume

Aspect's new 2.5% convertible senior note due 2014 also rose slightly on Friday, although activity was light with the deal seen as unexciting.

"I didn't think it was that attractive," a sellsider said. "I was giving it slightly below fair value where it priced."

Aspect priced the $110 million offering with an initial conversion premium of 22.5% on Thursday. The convertible traded at 101 against a stock price of $15.54 early Friday. Aspect stock (Nasdaq: ASPM) eased 1.09%, or 17 cents, to close at $15.37. The deal was talked at a coupon of 2.25% to 2.75% and an initial conversion premium of 25% to 30%.

There is an over-allotment option for a further $15 million.

Goldman Sachs was the bookrunner of the Rule 144A offering.

Aspect Medical, a Norwood, Mass.-based maker of the BIS anesthesia monitoring system, said it will use the proceeds to buy back about 2 million shares of its common stock from Boston Scientific, which will be left with about half of its current stake. The two companies earlier in the week ended their development alliance on the medical device.

"I didn't like it," a buysider said. "The borrow wasn't great, and I think some of the outright guys aren't very confident about the company because of the fact that Boston Scientific is pulling out of this partnership."

Thornburg upsizes, flat on debut

Thornburg's new 7.5% perpetual convertible preferred was unchanged on Friday, but the deal was believed to have been tightly placed and is not expected to be actively traded.

The convertible, which was offered at par of $25 each, did not shift from its offer price. Thornburg stock (NYSE: TMA) eased 0.63%, or 17 cents, to close at $26.80.

"It traded right around the issue, not that active though," a sellsider said.

Thornburg priced the upsized $68.75 million offering with an initial conversion premium of 20% on Thursday after the market closed.

The size of the deal was originally $50 million with an over-allotment option for a further $7.5 million. The greenshoe is now $10.3125 million.

Stifel, Nicolaus & Co. and A.G. Edwards & Sons were the bookrunners of the registered deal.

The preferreds will pay a fixed quarterly dividend at the base dividend rate. If Thornburg's common dividend exceeds 68 cents per quarter, the preferreds will pay an additional dividend amount equal to the product of the excess and the prevailing conversion rate.

Thornburg, a Santa Fe, N.M.-based single-family mortgage lender, said it will use the proceeds of the deal to acquire or originate additional adjustable-rate mortgage assets and for working capital.

"I don't think you'll see this very often," a buyside convertible trader said. "It's one of those deals that's really catered to just a small group of investors who are familiar with the company, who are willing to take the risks. You probably won't hear about it again."

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